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Bob Veres' Comment Letter to the SEC on Proposed Regulation Best Interest and Broker Standards

"The proposed disclosure language for broker-dealers, under 'Standard of Conduct,' would say 'We must act in your best interest and not place our interests ahead of yours when we recommend an investment or an investment strategy involving securities.' However, there is no evidence that the Commission intends to actually hold broker-dealers to this standard. In fact, there is abundant contrary evidence in your accompanying regulatory Proposal."

Life (Insurance) in the Fiduciary Lane

"[A] new amendment to the New York State Department of Insurance Regulation [imposes] a mashup of the infamous DOL Rule and the recent SEC regulatory proposals on life insurance salespeople operating in their state. The word 'fiduciary' doesn't appear anywhere. But the gist of the new rules is that life and annuity recommendations, if they are made inside the borders of the Empire State, now have to be in the best interests of the customer. Whoever wrote these regulations knows full well that the life insurance 'advisor' is actually selling products."

Why Aren't Advisor Groups More Involved in Efforts by States to Protect Investors?

"State securities regulators have historically been far less conflicted and 'captured' than the SEC, and have been on board with the idea that advisors should manage or avoid conflicts from the beginning. But at present, they don't have anything resembling a unified position on what a fiduciary law should look like. The logical group to propose model state legislation is the Financial Planning Coalition -- made up of NAPFA, the FPA and the CFP Board."

The Fleecing Equilibrium: FINRA Regs Protect Brokers, Not Consumers

"[W]e have been calling the FINRA regulatory structure a consumer protection vehicle, and pretty much everybody in the debate has fallen into the trap of thinking of it in those terms. But in fact, the FINRA regulations exist to protect the brokerage firms from the worst consequences of their perverse incentive systems."

Permanent Changes on the Job Due to the Pandemic

"Virtual meetings are opening up the marketplace.... The pandemic (and Zoom revolution) may be killing off the traditional wholesaling model.... Advisory firms are taking the opportunity to hire anywhere, and also to reduce home office space.... Advisory firms may be permanently more efficient as a result of the pandemic.... Virtual meetings may be slightly less personal than in-person meetings, but that has been more than made up for by greater frequency of contact."

The Diminishing Future of Investment Advice Regulation

"[S]ometime after 1975 ... the idea of a 'commission' morphed into something else, something closer to a bribe. Commissions became a way for product companies to pay a broker or sales agent to recommend their products over products which offered superior features or returns.... In retrospect, the SEC has proven to be a terrible regulator of this new commission regime.... With these new proposals, the SEC is fecklessly trying to, at the same time, restore merit-based investment recommendations to the marketplace and make Wall Street lobbyists happy."

SEC Proposal 34-83062: The Best Interest Standard for Broker-Dealers

"[T]he proposed standards for brokerage firms and broker-dealers ... are clearly NOT a 'best interest' standard, and calling them that will certainly mislead consumers into thinking that sales agents are required to put their interests ahead of the sales agent's and the firm's, when in fact they are not.... [T]he Proposal mixes a lot of high-minded language about doing what's best for the customer with specific standards that are no more high-minded than FINRA's existing suitability rules. There's a lot of talk about what brokers and sales agents 'should' do, but the actual standard as written doesn't actually require anything different from what is going on now[.]"

Financial Planners Must Push Forward as Advocates for Investors

"Based on past statements from Republican officials on Capitol Hill, there is every reason to believe that an undivided Republican Congress will repeal the Dodd-Frank Act, and President Trump will unravel the DOL fiduciary rule. The odds are that all this will happen within the first couple of months of the new year. However you feel about a Trump presidency, this will be a severe setback for the concept of professionalism in the financial planning world, and the strong fiduciary standard generally."

The DOL Rule: A Milestone for the Profession

"[T]he new rule fundamentally (and with pretty zero exception) requires the broker or independent BD rep to act as a fiduciary. That brings a lot of people into the principles-based universe, which is alien territory for the brokerage firms. They'll all have to set up subsidiaries that function as fee-compensated RIAs in order to keep working with qualified plan money.... Most importantly, the DOL rule writers seem to have been very careful to make sure that Wall Street firms and sales agents cannot disclose away, disclaim away or have their customers contractually sign away fiduciary responsibility."

Let the Lobbying Around Fiduciary Continue Just a Little Longer

"For the first time, ordinary people are reading that the brokerage firms and independent broker-dealers are standing four-square in favor of commission sales and strongly against having to serve the best interests of their customers.... The longer this lobbying effort drags out, the more articles we'll see. The more times this story comes up, the more the consumer writers will realize uncomfortable facts about conflicted business models that the members of the brokerage and independent BD community don't want their customers to know."